Ukraine may run out of money for non-military expenses and even soldiers’ salaries by October if a $27bn hole in the budget is not closed by October. Ukraine’s budget is facing its worst crisis since the start of the war in 2022, Finance Minister Serhiy Marchenko said in an interview with Euronews on September 4.

"We are already seeing some liquidity problems and forecasting a certain budget deficit," Marchenko said, adding that Ukraine had not faced a situation like this since Russia’s full-scale invasion. Because weapons procurement and military spending come first, he said, the government will probably have to postpone payments not directly tied to the war, starting at local level with shelters and infrastructure projects that he called "quite important" going into winter.

President Volodymyr Zelenskiy made a similar warning in Kyiv on August 24 during his Independence Day speech, saying that there was a $27bn shortfall in funding, calling on Ukraine’s western partners to send “more money and missiles.” The defence ministry, he said, has already used the money budgeted for it for the whole of 2026. Roughly $20bn of the estimated deficit is military salaries and payments to the families of the dead and wounded, Ukrinform reported, with a further $8bn to $10bn needed to prepare for the early part of 2027.

Part of the international commitments to Ukraine is blocked after it has backtracked on required reforms. A package of 27 bills tied to international financing has to pass the Verkhovna Rada by the end of October, and on September 1 the Rada failed to pass nine government measures in a single sitting that would have unblocked desperately needed aid.

The $27bn number has been widely reported, but it is not the whole state budget's gap, but just the defence ministry's allocation: "The ministry of defence has used the funds that were budgeted to the end of this year, and the total deficit is $27bn ". Because the ministry has spent its full-year allocation, the gap is in effect the shortfall for the rest of 2026.

Zelenskiy has asked that the 2027 half of the EU's €90bn loan should be brought forward to this year to cover the short fall. Euronews puts the same gap at €23.1bn and notes that about €6bn of it is advance payments for weapons due to be delivered in 2027.

Budget woes

The table below shows the itemised December 2025 budget law setting out spending for this year. The June 2026 revision is not included: it was published as headline totals plus a defence breakdown, so most lines cannot be restated. The 2027 column is the Budget Declaration of June 2026 rather than a draft budget law, because the 2027 draft is to be read in the Rada on September 15 and had not yet been presented.

Ukraine's state budget, as legislated and as projected. The June 2026 revision was published as headline totals and a defence breakdown only, so most 2026 lines cannot be restated. The 2027 column is the Budget Declaration of June 2026, not a draft budget law: the draft was due at the Rada on September 15 and had not been published when this was written. Sources: the budget law of December 3 2025 as reported by JurLiga, Forbes.ua, the Cabinet of Ministers and Kyiv Post; the revision of June 10 2026 as reported by Interfax-Ukraine from finance ministry figures and by the Ministry of Defence Industry; the Budget Declaration as reported by Ukrinform, Interfax-Ukraine, VoxUkraine and Forbes.ua.

The single most important row is security and defence. It was legislated at UAH 2.806trn, 58.9% of all spending and 27.2% of GDP. After the June revision it has almost doubled to UAH 4.367trn. That is an increase of UAH 1.56trn in one amendment, and almost nine tenths of it went on weapons and equipment, where that line rose from UAH 709.8bn to UAH 2.297trn.

Funding for the deficit is almost all covered using external assistance. The revision raised planned revenues by UAH 2.29trn, and UAH 2.221trn of that was the EU's Ukraine Support Loan booked as budget revenue, Interfax-Ukraine reported from finance ministry figures. The domestic contribution to a UAH 1.56trn defence increase was UAH 22.6bn of military personal income tax and some new export duties on military and dual-use goods.

So, the 2026 defence budget is, in the main, entirely funded by the EU's 2026 tranche of the €90bn loan. That is the fact that makes everything downstream fragile.

Europe promised cash yet to arrive

The €90bn Ukraine Support Loan was finalised by the Council on April 23 and is split €60bn for defence and €30bn for budget support, with €45bn allocated to each of 2026 and 2027. The 2026 half breaks down as €8.35bn of macro-financial assistance, €8.35bn through the Ukraine Facility and €28.3bn for defence.

But Brussels has been tardy with the distribution. As of September 11 the Commission had only sent Kyiv €8.35bn of the defence tranche and €3.2bn of budget support, about €11.6bn of the €45bn planned for this year. The first macro-financial instalment of €3.2bn went out on June 25, against seven policy conditions. The remaining instalments of €3.7bn and €1.45bn are indicative and conditional.

The defence side is allocated but still pending: the €28.3bn for 2026 is now fully committed after a second €6.1bn approval on September 11, but the cash will only be sent after contracts are verified. The Kyiv Post puts €4.7bn as in processing now - money that the treasury has already spent.

The amount of cash that has actually already reached the budget is much less. Across January to August, external financing to the state budget came to UAH312.7bn, about $7bn, made up of €2.44bn from the Ukraine Facility, SDR1.6bn from the IMF, $1bn from the World Bank and the rest from other creditors, on finance ministry figures reported by Ukrinform. General fund revenues over the same eight months ran UAH33.1bn below plan.

Pulling forward 2027 early wrecks next year’s budget

Zelenskiy asked the Nordic and Baltic leaders on August 23 to bring part of the 2027 €45bn tranche forward to this year, and Defence Minister Yevhenii Khmara repeated the request to counterparts in Ireland on about September 2, where Ireland's defence minister Helen McEntee said a significant group of member states supported it. The Commission's answer has been that it has had no formal bilateral request and that €45bn for 2026 remains the plan.

Frontloading the payment will change the timing of transfers but not the totals. If the €90bn loan is exhausted this year then the budget starts next year with the external funding line empty. Putting the published numbers side by side and the size of the problem that creates becomes clear:

Ukraine's total external financing need for 2027 is put at $52bn by a government source, and Marchenko says $32.6bn of it is unsecured

The Budget Declaration pencils in UAH 2.1trn of external financing for 2027, explicitly including €45bn from the EU

The 2027 deficit in that Declaration is UAH 2trn, or 17.7% of GDP, which at the Declaration's own rate of UAH 47.1 to the dollar is about $42bn

The difference between a $52bn need and a $32.6bn gap is roughly $19bn of financing Kyiv currently treats as secured, and the EU tranche is the bulk of that secured funding. Move that tranche into 2026 and the 2027 gap widens from $32.6bn towards the full annual requirement. On the published figures that lands in a range of about $40bn to $52bn – roughly the whole of next year's external need, according to IntelliNews calculations.

Frontloading the 2027 payments to cover this year’s shortfall; it will push the financial crisis Ukraine is facing now into the next year, but also make it bigger. The implicit assumption that something else will have turned up by then to fund Kyiv and pressure to tap the frozen $300bn of Russian reserve money is already rising. Alternatively, there would have to be a new substantial EU instrument, more bilateral loans from Japan, Norway and Canada, which a person familiar with the discussions described to Kyiv Post as "scraping the bottom of the barrel".

The numbers don’t add up

There is a discrepancy in the 2027 numbers that nobody has reconciled in public. Marchenko says the IMF sees a similar shortfall to his own $32.6bn. The IMF's July country report shows 2027 external financing of $28bn with a residual gap of zero, which is to say fully financed under its baseline.

The two are measuring different things. The Fund's table covers programme and balance of payments financing with partner assurances counted in; the finance ministry's figure is gross budget financing need with unpledged amounts stripped out. But the gap between the two perimeters is roughly $32bn, and it is the difference between a country that is financed and one that is not.

The IMF’s programme is modest and will help but not solve the deficit problem. The Extended Fund Facility approved on February 26 is SDR5.9353bn, about $8.1bn over four years, of which about $2.2bn has already been drawn down. The first review released about $690mn in July, and the IMF called the programme fully financed under both baseline and downside scenarios at that point. The second review was supposed to happen this month, but it has been delayed and wrapped together with the third review, due to the Rada’s failure to pass reform legislation required as part of the EFF deal.

The Rada will not vote, and the reviews are slipping

Ukraine's second review under the programme has been pushed to December and together with the third, delaying the next disbursement, after IMF staff who visited Kyiv from September 1 were described by two sources as "sad", and the talks as "fraught with negative expectations".

The immediate blockage is a value-added tax on low-value imported parcels, a condition for an IMF tranche of about $700mn and a €3.7bn instalment of EU macro-financial assistance. On September 1 the Rada rejected the bill and six alternatives, and failed to vote on appointing new members of the Accounting Chamber, which is also tied to international financing. The new Prime Minister Serhii Koretskyi told deputies an hour earlier that the package would unlock $30bn in partner commitments.

A governing-party lawmaker told the Kyiv Independent that the leadership had not secured the votes and chose not to put the bills that is part of an expanding domestic political crisis Zelenskiy is facing as he loses control over his own deputies in his Servants of the People party. "It's better not to put it to a vote, knowing it will fail, than to be humiliated like this," they said. "Perhaps they want to show the Europeans that the parliament is against it and nothing can be done."

The Fund has started talking to the opposition. It met the European Solidarity faction for a second consecutive visit, led by former President Petro Poroshenko. One participant put the message bluntly: "They made clear that if we keep voting this way, no one will give us funding, and they won't be able to help with anything."

Danylo Hetmantsev, who chairs the tax committee for Zelenskiy's Servant of the People party, says there is no disagreement with the Fund, only with his own chamber. "We're on the same page with the IMF. There are no contradictions between us. The talks were tough because the situation is tough," he said.

Reform going backwards

The harder problem for Kyiv's creditors is not delay but direction. In June, lawmakers tacked and buried a weakening of the anti-money-laundering rules on politically exposed persons into an unrelated digital-platform tax law in order to gather votes. The change let banks drop enhanced monitoring of former senior officials after 12 months unless they could document high risk, reversing the burden of proof.

The EU Council and the European Commission urged Zelenskiy not to sign, and he refused. The IMF said in June that the change had pushed Ukraine's system outside the Financial Action Task Force standards it is required to meet. The government has now registered bill No. 16051 to put the safeguard back, Euromaidan Press reported on September 9.

This backsliding comes admist the biggest and expanding corruption scandal of the Zelenskiy administration, which has reached into the presidential office itself. IMF mission chief Gavin Gray warned European Solidarity lawmakers that cases exposed by the National Anti-Corruption Bureau could harden opposition in donor capitals, according to European Solidarity's Nina Yuzhanina.

Russia’s frozen assets in focus again

Seizing Russia’s frozen assets increasingly looks like the only solution to Ukraine’s mushrooming budget problems. Marchenko asked European finance ministers to think creatively and revisit the roughly €210bn of Russian sovereign assets immobilised in the EU, most of it at Euroclear in Belgium. The design he wants is not confiscation but a transfer of custody to an EU-level body, so that exposure to Russian litigation is shared across all 27 rather than carried by Belgium alone – its main concern and why it blocked the Reparation Loan idea in December.

"The plan creates new conditions where it is not the responsibility of Belgium to face court disputes with Russia, but the joint responsibility of the 27," he told Euronews. "It will help to settle everything and mitigate the risk."

EU ministers rejected the first version in December and chose the €90bn loan option instead. A group led by Sweden revived it in late August, joined by the Netherlands, Spain and Poland, on the argument that the cost of supporting Ukraine should be spread across European taxpayers rather than left to whoever holds the securities. Sweden's foreign minister Maria Malmer Stenergard called it "a fair and reasonable way to ensure that Ukraine can defend itself and all of Europe".

Belgium's terms have not moved. Prime Minister Bart De Wever wrote to EC President Ursula von der Leyen: full and signed guarantees, risk-sharing that does not lapse when sanctions do, nothing that can be read as confiscation, and immediate compensation if Euroclear has to return the assets. "The distinction between a reparation loan and confiscation is, in reality, extremely narrow," he wrote. He is still asking for an uncapped guarantee, The Moscow Times reported on September 10. Russia's central bank is separately suing Euroclear in Moscow for about €230bn for the “theft” of its money.

The legal position has not changed either. Moving the assets between custodians is untested. Confiscating them outright is a different matter entirely, and no EU government is comfortable with exposing itself to the legal risk. Europe’s banks are also concerned that they might get caught up in the legal crossfire and are against a confiscation. The reason the idea keeps returning is not that the law has improved but that the EC is rapidly running out of alternatives to using Russia’s money to pay for the war.

Fuelling Ukraine fatigue

Ukraine is not the only one under increasingly pressure. The debacle that is developing over the funding of Ukraine is causing friction at home in European capitals. France, Italy and the United Kingdom all already have massive debts and are all running deficits well above the 3% of GDP Excess Deficit threshold mandated by EU treaty rules so are in position to borrow more. The European governments have run out of fiscal wiggle room as well as weapons.

But has EU leaders continue to send billions to Kyiv their citizens are getting annoyed as basic services get cuts and the cost of living crisis gets worse. They want that money spent on themselves, not Ukraine, fuelling fatigue and resentment. On September 6 the far-right Alternative for Germany finished first in the Saxony-Anhalt state election, just short of a majority, on a platform that includes cutting aid to Ukraine and resuming economic ties with Russia. Gray told the European Solidarity lawmakers that elections in five European countries could produce similar outcomes less favourable to Kyiv, "as public opinion there is being turned against aid to Ukraine".

The EU's own answer this week was to approve rather than to send. The Commission signed off €6.1bn on September 11, which completed the allocation of the 2026 defence envelope without adding a euro to it.

Ukraine’s economy was already in a bad way, but an underfunded budget could kick it into the full blown macroeconomic collapse that was predicted in April, when the €90bn loan was still in doubt.

Growth turned negative 0.6% year on year in the first quarter and only grew 0.4% in the second, against 5.5% growth in 2023 after the 28.8% collapse of 2022. Annual inflation reached 8.1% in August, with fuel up 38.7% year on year. The National Bank has cut its 2026 growth forecast to 1.3% and raised its end-year inflation forecast to about 9.4%.

International reserves fell 5% in August to $48.7bn, with net reserves down 6.9% to $33.8bn, on National Bank figures reported by Interfax-Ukraine. That is about four months of imports, and it is the buffer that has to absorb any delay in external financing.

Public debt is heading through 100% of GDP, with the IMF putting the peak at 111.8%. The Budget Declaration assumes 4.5% growth in 2027 and a hryvnia averaging UAH 47.1 to the dollar. Both look optimistic against a Q2 print of 0.4%.